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Exemption u/s 54f of the it act?

Ramakrishna (student) (88 Points)

08 March 2013

When Capital Asset is converted into stock a Capital Gain arises when that stock is sold.

My query is whether an assesse can claim exemption u/s 54F by investing it in a residential house property?

Most impotantly are there any CASE LAWS ??? Circulars???

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Prashanth S K (Practice) (148 Points)
Replied 08 March 2013

Sec 54 F provides that "the capital gain arises from the transfer of a long term capital asset, not being a residential house and......". If u see the definition of capital asset u/s 2(14) it specifically excludes stock in trade. So going by these words, sec 54 F exemption cannot be claimed in your case.

But interestingly there is a case law "R.Gopinath (HUF) vs ACIT in the ITAT, Chennai Bench 'A' in the year 2010(133 TTJ 595)" where in a land is converted into stock in trade and the same has been sold to a builder who builds and hands over the property to the seller of the land and the seller(assessee) claimed deduction u/s 54 F and though it was contended by the AO, it was allowed by the ITAT. The point which i have said has not been considered at all anywhere in the case.

So u can claim and quote this law in case of any dispute.

Kindly correct me if i am wrong.

Regards

Prashanth.

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